European Court ruling forces Google to mince its AdWords

September 22, 2011

The world of marketing may little note, but long find itself remembering, an obscure judgement handed down by the Court of Justice of the European Union today.

It concerns the endemic practice of buying someone else’s brand name (or, more specifically, trademark) as a search term and then having all resulting enquiries directed, heretofore quite legally, towards your own enterprise. The practice is enshrined in such services as Google AdWords.

A good example of the wheeze in action is Virgin Media. Tee’d up for a mega-marketing launch back in 2006, it was mortified to discover that its principal rival, BSkyB, had bought up all Google search references to the VM brand name and was redirecting any interest to Sky.

Marks & Spencer sought to pull off a similar stunt when it “bought” the Interflora AdWord search term in 2009, with the intention of substituting its own online flower shop every time an internet user searched for “interflora” on Google.

A bouquet of barbed wire for Google

Sadly for M&S, Interflora had a sense of humour loss and sued in the English law courts – which referred the matter to the supreme jurisdiction of the CJEU.

Well, the ruling has come in and it’s not going to be to M&S’s liking, or that of any other brand owner seeking to poach a rival’s name online. The court has decreed that buying your competitor’s name infringes trademark law on two counts: the ability to identify the origin of goods and services; and the right to preservation of a brand proprietor’s reputation. Crucially, it has ruled that proprietors of a trademark (let’s call them brand owners) can actually prevent a competitor using their name where they can prove free-riding or brand denigration is taking place. Which in practice will have a chilling effect on AdWord activity.

The ruling will cause widespread dismay, not least at Google – which has heavy investment in the practice. And all the more so because in a previous case, that of Google v Louis Vuitton (2010), the court had seemed to lean the other way. It said that Google, as intermediary, did nothing wrong in allowing AdWords to promote the practice of buying other people’s brand names, and that the existence of the service in no way infringed trademark law.

What it did not do was rule upon the legal responsibility of the search term purchaser, as opposed to the intermediary. In other words, the subsequent M&S case is a landmark judgement, which will now be handed back to the English courts for enforcement.

In the words of Kirsten Gilbert, partner at intellectual property specialist Marks & Clerk Solicitors: “Brand owners will be encouraged that their competitors no longer have a completely free rein over use of their trademark as a keyword. But, the practice of purchasing rivals’ trademarks as keywords is widespread, and marketers may now have to think of other creative ways to advertise their brands on the web.”

How two-edged the sword of justice is.

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Bad news for Rebekah Brooks, but good news for BSkyB’s Jeremy Darroch

July 6, 2011

Jeremy Darroch, chief executive of BSkyB, now looks in an even more powerful position to inherit the News International mantle of power (should he wish to) than when I flagged up his significance to the Murdoch empire in my last Marketing Week column.

Rebekah Brooks, NI’s current chief executive, is terminally damaged goods, in the wake of ‘Millygate’. Not to mention ‘Jessica-and-Hollygate’ and ‘7/7-gate’.

For the moment, of course, it’s Andy Coulson, ex-News of the World editor and David Cameron’s former director of communications, who has been thrown to the lions. Thanks to some NI emails which have mysteriously surfaced just in time, Coulson is now a proven liar. He procured, or authorised procurement of, paid information from the police while he was News of the World editor – something he has previously strenuously denied. And for good reason: it is quite illegal.

It’s an astute, if cynical, sacrifice, and proves the Murdochs are still thinking on their feet. Coulson’s disgrace tarnishes both Cameron (by association – after all, he picked Coulson, despite his dodgy reputation, and then backed him to the hilt in his hour of need) and Knacker of the Yard (assistant commissioner John Yates, once the officer in charge of investigating the phone-hacking scandal at the epicentre of the Murdoch crisis, who is now looking woefully ‘under-informed’ and incompetent, after previously vociferously denying the merest scintilla of police complicity in the matter).

Even so the Coulson gambit is, at best, a delaying tactic. It will make our leading politicians and policemen tread a little more carefully, but it will not prevent them from taking decisive action. Public opinion is now too inflamed for them to do anything else.

Inescapably, the smoking gun is pointing at Brooks, née Wade, and editor of News of the World when – it now emerges – NI’s private investigator of choice Glen Mulcaire was hacking into the phones of Milly Dowler’s distressed relatives. She says she knows nothing about it. Do we believe her, any more than we believed Coulson’s protestations of ignorance? I’ll leave that one hanging in the air.

Ordinarily, implicated NI and former NI executives have been able to take refuge in prevarication, in the sure and certain knowledge that rapidly abating public interest will soon allow them to emerge from their burrows relatively unscathed. This crisis is different.

It has an unprecedented commercial dimension to it. Top advertisers, led by Ford, are boycotting News of the World, and that really will hit the Murdochs where it hurts. Ford is the single biggest advertiser, contributing about £4.5m annually to NoW’s £40m display advertising revenue. Halifax (owned by Lloyds Banking Group) has now joined Ford. Other major advertisers believed to be considering their options are T-Mobile/Orange, Vodafone and nPower. The danger, from the Murdochs’ point of view, is that this commercial contagion spreads to other NI newspapers, such as the Sun – which Brooks also edited. It could easily do so, given a swelling social media campaign goading consumers to boycott advertisers who refuse to align themselves behind Ford. (There’s a useful live update on the brands boycott at Marketing Week.)

All of which may well rapidly result in Brooks becoming surplus to NI requirements.

OK, you say, but what has this got to do with Jeremy Darroch? I’m coming to that. Whatever the backwash from the phone-hacking scandal, it will not prevent culture secretary Jeremy Hunt from giving his blessing to Murdoch-vehicle NewsCorp’s acquisition of the 61% of BSkyB it does not already own. Legally, a challenge to that assent is now well-nigh impossible. Indeed, Hunt and the Government would probably be on the receiving end of a writ it they were obstructive.

Let’s assume for a moment that the deal is done, that the Murdochs have pacified BSkyB shareholders with an eye-watering amount of money and are now the proud possessors of the rest of the organisation. What are the repercussions for NewsCorp and in particular its UK-centric arm, NI, in the wake of a full takeover?

BSkyB is one of the UK’s most powerful companies with, just to give the flavour, a marketing communications budget of £1.2bn a year. It is phenomenally cash rich. One estimate reckons that, once acquired, it would contribute 30% of NewsCorp’s cashflow. Like the Murdochs’ newspapers, it is UK-centric. Unlike the newspapers, it is highly profitable. Unlike the newspapers again, it is still a dynamic growth business, which has made good use of product innovation.

In short, it would be the jewel in NI’s crown. Who better to manage that jewel in the new, enlarged organisation – a man of untarnished reputation who intimately understands subscription TV; or Brooks, with her yesterday’s tabloids background?

Of course, I have no idea whether Darroch would actually be interested in such a proposition. He may well take his money and run. But it’s worth thinking about, isn’t it?

UPDATE 17.30 – 7/7/11: So, The News of the World is no more. The Sunday edition, shorn of advertising, will be the last in the newspaper’s 168-year history. Nothing could more graphically illustrate the gravity of the crisis engulfing NewsCorp than that its chairman and chief executive Rupert Murdoch should take the drastic step of closing his most profitable newspaper and the one – to boot – he started out with back in 1969. The suspicion lingers that a skeleton NoW staff will be retained to flesh out a 7-day version of The Sun. “The Sun on Sunday” has long been rumoured as a cost-cutting project. How typical of Murdoch that he should turn a disaster into a publishing opportunity.

UPDATE 7/7/11: Determination not to be the last advertiser at the News of the World has now reached frenzied proportions, as Vauxhall, Virgin Holidays, O2 (£1m), Boots (£800,000) and  Sainsbury’s stampede to the exit with Ford, nPower and Lloyds Banking Group. Morrisons next, I suspect. Will anyone be buying the paper anyway? Newsagents expect a boycott on Sunday.


Shining example – Elisabeth Murdoch sets up a mirror to James

February 22, 2011

In Outcasts, a Shine Television production currently airing on BBC1, the mysterious comeback-kid Julius Berger has managed to weasel his way onto the governing board of the Carpathian colony, armed with a silver tongue and a bulging power agenda. What will he do next – overthrow president Tate?

It’s hard to believe that James Murdoch isn’t – like Carpathia’s president – feeling the teensiest bit paranoid. Having his sister Elisabeth back on board (literally) after a decade’s absence from News Corporation is a mixed blessing.

On the one hand, the £415m acquisition of Shine makes News Corporation that much more a creative content and entertainment company, and that bit less a TV platform with a legacy newspaper business tied in. Then again, Liz is clearly an asset. She has won her spurs as a talented entrepreneur and manager during her near 11 years of independence from NewsCorp. Even if £415m is a tad generous (but hey, what’s wrong with a bit of nepotism if you can afford it?), no one seriously doubts that Shine is a good business, operating in the right place. How different her standing from the year 2000 when she quit as managing director of Sky Networks, apparently in mounting frustration over her father’s reluctance to give her full executive responsibility for BSkyB.

On the other, that’s just the problem for James. As someone with credible executive experience gained outside the family business, she must now pose a subtle threat to his role as heir presumptive to the Murdoch empire. Not an overt threat, of course. Merely a reminder that Rupert Murdoch, now nearing 80, has other options when it comes to handing over the reins of power.

Significantly Liz, 42, will not report to younger bro James, 38, but to Chase Carey, NewsCorp’ US-based deputy chairman, even though her business is centred in London.

Every time James makes a club-footed move from now on, it will be contrasted (fairly or not) with the more circumspect and reserved behaviour of his sister. And James has made a few club-footed moves, hasn’t he? The dawn raid on ITV shares, so audacious at the time, now looks less well-conceived. Then there was that intemperate raid of another kind – on the offices of The Independent’s editor-in-chief Simon Kelner, driven by blind but misguided rage. And finally, we have the ongoing News of the World bugging scandal, in which James’ handling of the situation has been called into question.

I mention this because the issue of James’ character and leadership qualities has just been raised (at some length) by an authority more eminent, and certainly more informed, than me: Tim Arango in The New York Times. Arango concludes: “James Murdoch is trying to succeed at the company his father built, but he is a very different character: more blunt, more bureaucratic and less able to smooth ruffled feathers. He has his father’s aggressiveness but not his tactical sense or temperance.” Just in passing, I suggest that his sister, though arguably less aggressive, is also less blunt, less bureaucratic and a lot more able to smooth ruffled feathers. I’m not sure about her “tactical sense”, but more so about her “temperance”.

All this would matter less if James’ leadership qualities were not about to undergo their supreme test. If the current chief executive of  NewsCorp Europe and Asia can shepherd the other 61% of BSkyB’s equity into NewsCorp’s stable, his future looks assured. He will then be in charge of roughly half the media empire’s revenues.

But what if he doesn’t? Suppose, for example, that the takeover is referred to the Competition Commission after all, and that Murdoch père decides the matter is no longer worth pursuing. How would that leave James’s leadership credentials looking? Impaired to say the least.

Which leads me to one last thing. The timing of the Shine deal seems very odd. Why was it concluded shortly before culture secretary Jeremy Hunt reached his decision on whether to invoke the CC, rather than afterwards? Having Shine – a considerable presence in British TV programme production – on board can only heighten anti-Murdoch paranoia, and put more pressure on Hunt to refer.

UPDATE 25/2/11: Silly me. Jeremy Hunt had already reached his decision, and it’s not to refer. That’s the gist of a report in today’s Financial Times. The FT suggests that Hunt and Rupert Murdoch have agreed to remove Sky News from a fully Murdoch-owned BSkyB, while at the same time guaranteeing its financial security. Strictly in the interest of ‘media plurality’, you understand. Mind you, the Murdochs still have to launch a successful takeover bid.


BSkyB – nearly the company with the UK’s biggest marketing budget

January 4, 2011

Will BSkyB soon become the UK’s biggest marketing company? It’s a sobering thought  – especially for those who, like culture secretary Jeremy Hunt, must now consider whether Rupert Murdoch and his son James are fit and proper guardians of the 61% of the broadcast media company they do not already own. What will they do with unfettered control of all that money – not so much when it is directed at ITV and the BBC (the case already), but at BSkyB’s non-broadcast rivals?

In fact, BSkyB is still some way from being the company with the biggest marketing budget. The latest Nielsen figures, which leaked out just before Christmas in The Telegraph, reveal that BSkyB has now moved into number two position behind Procter & Gamble in the advertisers’ league table: not quite the same thing, but the most reliable indicator we have in these matters. The main casualty – inevitably given what has happened to it – is the Central Office of Information. For some years the COI sat on, or very near, the top of the pile. Its fall from grace has been melodramatic: despatched from top to fifth place, with spending slashed 47% to settle – for now at – £112m. There’s no likelihood of it getting back.

BSkyB, on the other hand, increased its spend 20% to reach £161m. But even that wasn’t nearly enough for it to become top dog in the near future. P&G put on another third – giving it an unassailable lead at £189m. Unless of course BT, currently 7th with a spend of £104m, continues its phenomenal 44% multiplication of spend for the next three years (unlikely, I suggest).

These Nielsen figures are interesting indicators, but they need to be viewed with considerable caution. Although they purport to record expenditure to the end of the calendar year, there are a number of caveats; for example, there is no internet spend included for the last quarter (a significant omission). They are, moreover, merely a ratecard indicator: they do not tell us what was actually spent after discount. Finally, they do not record all forms of marketing activity. And some of these excluded sectors, like POP, are absolutely massive.

For all these imperfections, however, the Nielsen figures reveal a remarkable truth. BSkyB has become one of the UK’s most powerful companies, and it has done so in large measure through the intelligent application of marketing.


Vince hands BSkyB to Murdoch on a platter

December 21, 2010

It would appear the Scourge of Capitalism (aka business secretary Vince Cable) was bent on doing exactly what I earlier predicted. That is, committing a gross act of hypocrisy – in the clandestine manner of the bankers he so despises – by rigging the market to get the result he wanted.

This is the only reasonable interpretation of his unguarded remarks to two Telegraph undercover reporters about “declaring war on Mr Murdoch”. He is of course referring to his supposedly impartial role in adjudicating the acceptability of NewsCorp’s bid for the 61% of BSkyB it does not already own. For the avoidance of doubt the guileless minister of the crown went on to explain to the two reporters – posing as constituents: “I have blocked it [the bid] using the powers that I have got and they are legal powers that I have got…”.

Actually, that last bit is a tad premature. Ofcom is not supposed to report back on whether there is a prima facie case for referral to the Competition Commission until December 31st. But Vince was clearly confident that he had Ofcom in his pocket and could press ahead with a referral on the public interest grounds of an infringement of “media plurality”. The beauty of such grounds is that they reside entirely in the realm of political value judgement rather than the rigorously factual analysis of any threat to competition. And given that Cable would have had the final word, Murdoch & Co were clearly going to be thwarted.

No longer. Vince is off the case (indeed, he is off any adjudication of media competition cases from now on), although he has narrowly managed to retain his job. And culture media and sport secretary Jeremy Hunt will take his place. As a Tory, Hunt does not carry Cable’s Lib Dem ideological baggage; and if he does harbour any personal animosity towards the Murdoch clan it has so far remained scrupulously off the record.

Which is just as well. In the circumstances he will find it politically excruciating to deliver the thumbs down. The European Commission has just waved through the bid on competition grounds. That leaves the public interest argument. But this, too, is looking increasingly shaky when assessed on any fair-minded basis – as it will have to be in the wake of Cablegate. The legal precedent was set when the last government forcibly caused BSkyB to divest most of its 18% stakeholding in ITV. Ironically, the stated grounds were that NewsCorp’s then 39% holding in BSkyB posed a threat to UK media plurality. If you’re already a threat to media plurality when you hold a controlling 39% interest in a company, how is owning the rest of the shares going to make a material difference?

As political fiascos go, this is a corker. The Scourge of Capitalism has ended up performing a humiliating act of public self-flagellation. In the process, he has damaged Ofcom’s independence and almost certainly brought about the result he most feared: the strengthening of Rupert Murdoch’s commercial interests.

En passant, he has also damaged The Telegraph – one of his allies in the Murdoch matter, if no other; although Cable can hardly be blamed for that. The Telegraph deliberately suppressed Cable’s anti-Murdoch comments, presumably on the grounds that they harmed its commercial interests. Only because some nameless Assangeite felt that editorial integrity had been inexcusably compromised did the scoop come into the capable hands of BBC business editor Robert Peston.

I bet they’re laughing up their sleeves at Osterley Park and Wapping. I can’t say I blame them.


Francis Maude’s Sword of Damocles leaves the COI’s future hanging by a thread

October 15, 2010

Clearly the future of the Central Office of Information, which has been around since 1946, is even more precarious than I – or I suspect its chief executive Mark Lund (left) – had imagined.

Not content with imposing an emasculating 40% cut on the COI’s 737-strong workforce, the Government is now openly toying with the idea of casting its eviscerated carcass onto the bonfire of the quangos.

The decision, which will not be finalised until the end of November, is in the hands of cabinet office minister Francis Maude. Maude’s views on the subject may readily be gauged by his recent actions. He has floated the idea of the BBC airing COI campaigns free of charge – presumably in place of the many self-indulgent programme trailers and cross-channel promotions which now clog our viewing. Indeed, he has gone further. Since media buying would, to the extent that campaigns are aired by the BBC and not commercial channels, become redundant, he has taken the logical step of opening negotiations with WPP over M4C’s £200m centralised media buying contract.

Strip out centralised media buying, and it is very difficult to see what else is propping up the rationale of the COI. Specialised consultancy advice? Increasingly unlikely. Such industry knowledge will be a rare commodity once the organisation has been cut to the bone. And if that is so, the road to dissolution begins to look like a four-lane motorway. As with other quangos facing the axe, any essential functions will be transferred to alternative organisations – here, the bigger-spending departments of state such as the DoH.

All this would be a terrible blow for commercial television (especially ITV, which carries the bulk of COI campaigns). But it is doubtful whether agencies (beyond M4C and the media buying community) would shed anything other than a few crocodile tears. Someone still has to make the ads; and Richard Pinder, chief operating officer of Publicis Worldwide, has made it abundantly clear that his agency for one would be right behind the Maude proposal. Others may be more muted, but it’s unlikely they will disagree with him.

If Maude gets his way, it will be the realisation of a terrible irony. Previous COI ceos – namely Carol Fisher and Alan Bishop – have fought tooth and nail over the past decade, ultimately successfully – to suppress a secession by departments of state.

But will Maude actually go through with it? Don’t underestimate the BBC’s ability to kick up a stink over this: it doesn’t like the Maude Plan any more than ITV, although for a quite different reason. The whole issue threatens to become mired in a heated “public interest” debate, pivoting on the BBC’s impaired political impartiality. What with the brouhaha over BSkyB (to refer, or not refer, Rupert Murdoch’s bid), I doubt that the coalition government will have the stomach to take on an alienated ITV and truculent BBC as well. No doubt about it, though, it’s a thin thread the COI’s future hangs by.


Murdoch-bashing is the BBC’s best defence

October 8, 2010

Say what you like about BBC director-general Mark Thompson (and some do find him a bit antenna-challenged), he’s doughty in defence.

BBC's best defence?

Having got his hands on a big stick to club his bete noire and tormentor James Murdoch at this year’s MacTaggart Lecture, he’s now taken the media war to Murdoch Snr’s “home” terrain by  very publicly wading into the “Stop Murdoch getting Sky at any price” debate on America’s normally unremarkable public service television network (PBS). Thompson told the Charlie Rose programme that giving Murdoch what he wanted – the other 61% of BSkyB – would result in “a significant loss of plurality in our media market” and the “potential of an abuse of power.” In effect, it’s the old “Silvio Berlusconi” caricature – lovingly etched by Claire Enders – being given a new lease of life.

Whether a wholly-owned Murdoch Sky would really lead to an abuse of power I have no idea; beyond mentioning what people seem to conveniently forget in this debate – Murdoch’s imploding newspaper revenues. But the truth of the matter is less important than its plausible representation. And here – hats off – I must admire Thompson the tactician. Intelligently using the fewer resources at his disposal he has turned attack into the best form of defence. Like some latter-day Stonewall Jackson.

What Thompson has scented is a definitive change in the balance of UK media power which he is exploiting to the BBC’s advantage. It cannot have escaped notice that the regulatory authorities – prodded by the politicians – are spending an increasing amount of their time pursuing alleged abuses of BSkyB’s power – as instanced by investigations into its significant stake in ITV, and its control of premium sport and film content. What juicier opportunity to get politicians frothing at the mouth than pointing up the imminent prospect of Murdoch getting his hands on all of Sky’s £6bn revenues and £950m cashflow? Thompson nicely emphasised what’s at stake in his MacTaggart Lecture when he suggested Sky’s marketing budget alone dwarfs what ITV spends on its programmes. It now appears he has made common cause on the matter of Murdoch’s overweening power with some very odd bedfellows indeed: just about every other newspaper proprietor in the country.

And while the media and the politicians are diverted by the prospect of one long, uninterrupted, Murdoch-bashing fest, who’s going to be bothering with such pettifogging issues as bloated budgets, out-of-touch management, abuse of the internet media market and pension funds running amok at the BBC? Which should make for a fairly uninterrupted run-up to the next licence-fee negotiations.


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